Risks and global supply chains: What we know and what we need to know

Richard Baldwin and Rebecca Freeman

No 29444, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent supply disruptions catapulted the issue of risk in global supply chains (GSCs) to the top of policy agendas and created the impression that shortages would have been less severe if GSCs were either shorter and more domestic, or more diversified. But is this right? We start our answer by reviewing studies that look at risks to and from GSCs, and how GSCs have recovered from past shocks. We then look at whether GSCs are too risky—starting with business research on how firms approach the cost-resiliency trade-off. We propose the risk-versus-reward framework from portfolio theory as a good way to evaluate whether anti-risk policy is justified. We then discuss how exposures to foreign shocks are measured and argue that exposure is higher than direct indicators imply. Finally, we consider the future of GSCs in the light of current policy proposals and advancing technology before pointing to the rich menu of topics for future research on the risk-GSC nexus.

JEL-codes: F10 F13 F14 F15 F23 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-int and nep-opm
Note: IFM ITI
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Citations: View citations in EconPapers (30)

Published as Richard Baldwin & Rebecca Freeman, 2022. "Risks and Global Supply Chains: What We Know and What We Need to Know," Annual Review of Economics, vol 14(1).

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Journal Article: Risks and Global Supply Chains: What We Know and What We Need to Know (2022)
Working Paper: Risks and global supply chains: what we know and what we need to know (2021)
Working Paper: Risks and global supply chains: What we know and what we need to know (2021)
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